"This is the thin edge of the wedge to the ceding of Canadian cultural institutions to American investment," Peter Murdoch, media vp at the Communications, Energy and Paperworkers Union of Canada, said in the wake of Wednesday's blockbuster deal (HR 1/11).

To secure regulatory approval for its takeover, Winnipeg, Manitoba-based CanWest Global must now convince the Canadian Radio-television and Telecommunications Commission that it will be the one running the 13 cable channels that are the focus of the deal, even though Goldman Sachs will provide the bulk of the financing.

Executives at CanWest Global were not available for comment Thursday. But securing regulatory approval for Canadian broadcast deals traditionally hinges on showing who has effective, or "de facto," control of the target company after an acquisition.

The fact that CanWest Global is contributing only CAN$132 million ($113 million) for an initial 17% stake in the new company, leaving its U.S. equity partner to cover the rest of the purchase price with a mix of equity and arranged lending, will complicate matters in a heavily regulated industry fearful of Hollywood and other foreign intrusions.

"Besides the obvious increase in (media) concentration, and the possible impacts on advertisers, employees and the producers of content, there is an additional element of foreign ownership to this deal that would appear, at least on the surface, to violate current regulations," said Lise Lareau, president of the Canadian Media Guild, another Canadian media union.

But David Zitzerman, an entertainment lawyer with Toronto-based Goodmans, insisted that CanWest Global can structure the deal so that it retains voting and operating control over the new broadcast concern while Goldman Sachs remains on the sidelines as a passive investor.

Current Canadian law bars foreign companies from owning more than a 20% of a domestic broadcaster and up to 33% of the holding company that owns the remaining 80% stake in the broadcaster.

So CanWest Global, which is being advised by Toronto-based legal firm Osler, Hoskin & Harcourt, will need to convince the CRTC that Goldman Sachs' voting control will not exceed those voting boundaries or violate traditional minority investor protections.

The CRTC also will expect to see that it is CanWest Global largely calling the shots in regard to board appointments as well as maintaining control of the new venture's day-to-day operations.

"Where there is debt, equity, minority shareholder rights -- nothing in those elements should confer de facto control" on Goldman Sachs, Zitzerman said.

The CRTC also needs to be satisfied that Goldman Sachs will be fenced off from creative control of the 13 cable channels, including questions over which U.S. shows are bought and for how much.

The regulator also will scrutinize loan and security documents to ensure that Goldman Sachs would not gain de facto control should the new broadcast concern default on its borrowings.

"Yes, they (Goldman Sachs) gave majority financing and have a large interest. But they don't have legal control because CanWest Global will have more than 50% of voting control," he said.

But the CEP's Murdoch said he will urge the CRTC to deny approval for the Alliance Atlantis deal on grounds that a foreign company largely financed it.

"Yes, there can be a labyrinth of nominal board members, but quite clearly the person, or in this case the company, putting out the cash, in one way or another, will have effective control over the company," he said.

The question of who's in charge will be front and center later this year when the CRTC gets around to considering another blockbuster deal, Bell Globemedia's CAN$1.7 billion ($1.4 billion) takeover last year of rival broadcaster Chum Ltd. and its stable of cable channels.

More industry consolidation could be in the works here. There is speculation that rival broadcasters Corus Entertainment Inc. and Astral Media Inc., who were separately eyeing Alliance Atlantis' cable channels, could merge to challenge industry leaders CTV and CanWest Global after their recent tie-ups.

Corus' "marriage with Astral, regardless of the deal structure, would make sense, combining East with West to create a specialty, pay TV (and) radio powerhouse, and act as a counterweight to the asset clusters of CanWest and CTVglobemedia," Desjardins Securities analyst Carl Bayard said in an investment note.

Alternatively, Astral could take a run at Standard Broadcasting, a major Canadian radio operator.

"Astral has its own path laid out for itself to grow organically and through acquisitions," Ian Greenberg, president and CEO of Montreal-based Astral Media, told analysts Thursday after delivering his latest financial results.